Hidden California state parks funds spark outrage

California state parks Director Ruth Coleman resigned and her second-in-command was fired Friday after officials discovered the department has been sitting on "hidden assets" totalling nearly $54 million.

The money accumulated over 12 years in two special funds the department uses to collect revenue and pay for operations: $20.4 million in the Parks and Recreation Fund, and $33.5 million in the Off Highway Vehicle Trust Fund.

The money accumulated, state officials said, because the parks department had a pattern of underreporting the actual size of the funds in its regular dealings with the state Department of Finance.

Why and how this occurred remains a mystery and will be the subject of investigations launched Friday by the Department of Finance and the state attorney general's office, said John Laird, secretary of the California Natural Resources Agency, which oversees the state Department of Parks and Recreation and who announced the discovery of the funds on Friday.

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Officials said they don't yet know whether any laws were broken or if additional employees will be disciplined.

State officials did not directly say there was intention to keep the money secret. But they implied as much, with Laird terming the surplus "hidden assets."

Coleman, the longest-serving director in the 150-year history of the parks department, said in her resignation letter she did not know about the surplus. Laird said it is not yet clear who is to blame for allowing the money to accumulate.

"It's an incredibly troubling discovery," said Laird. "Ruth has stepped up and taken personal responsibility."

Coleman submitted her resignation late Thursday. Her second in command, acting Chief Deputy Director Michael Harris, was removed from his job and no longer works for the parks department. Friday morning, Gov. Jerry Brown announced that Janelle Beland, an undersecretary at the Natural Resources Agency, would serve as acting parks director.

Laird said, once the surplus was discovered, Brown moved immediately to begin investigating and inform the public.

"We can't answer every question because we thought it was more important, within 48 hours of finding out about it, to go public," Laird said.

Advocates for the state parks system reacted with alarm and dismay. The money would have been enough to cover – twice over – the $22 million in state budget cuts imposed on parks in 2011. In response to the cuts, the department moved to close 70 of the state's 278 parks, an unprecedented act. Virtually every other park has had its hours and services cut to save money.

Ted Jackson, a retired park ranger and former deputy director of operations at the department, said the surplus funds could have served as a safety valve to keep parks open while the state's economy recovered.

"The department has been going around telling people we had to close parks, and it comes to light we had been sitting on this kind of money," Jackson said. "It's devastating for the department and it's devastating for state government. This is the worst violation of the public trust that one could imagine."

Most of those park closures were avoided because numerous nonprofits and local governments put up their own money to take over parks or subsidize state operations. This made the revelations of "hidden assets" even harder to stomach, because all the heartache and fundraising might not have been necessary.

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"It could not be more damaging to everything that we're trying to do here – to the public faith and confidence in the work that we put in," said Caryl Hart, director of Sonoma County Regional Parks, who helped coordinate local groups to rescue state parks targeted for closure in that region.

One swift fallout was that Sonoma County park advocates on Friday canceled a local sales tax ballot measure planned as a long-term funding solution for parks in the region. The news of financial mismanagement at the state level, Hart said, was "just too much" to overcome in a campaign for the measure.

"We were on the brink of doing something transformative in Sonoma County when this happened," Hart said. "This has so many layers of destruction."

Vacation buyouts program probed

Friday's revelation came in the wake of an investigation The Bee published Sunday into an unauthorized vacation buyout program at the parks department last year that cost the state more than $271,000.

The program, in which employees were allowed to sell unused vacation time back to the state, was carried out in secret, according to an internal department audit and subsequent investigation by the state attorney general's office. To avoid a paper trail, the buyout requests were submitted in some cases only on Post-It notes, not official forms, according to the internal audit obtained by The Bee.

Numerous sources told The Bee that the program was carried out by Manuel Thomas Lopez, 45, of Granite Bay, who was deputy director of administrative services at the parks department. According to payroll records obtained by The Bee, Lopez received one of the largest single payouts in the buyout program, amounting to at least $20,600.

The Natural Resources Agency would not confirm Lopez was involved, citing personnel confidentiality laws. But state officials did say that he was demoted in October – the same month his superiors learned of the buyout – and resigned in May.

Prior to publication of Sunday's article, The Bee began asking about rumors of a large budget surplus at the department and on Wednesday filed a Public Records Act request to obtain related documents. Forty-eight hours later, the Natural Resources Agency announced the discovery of the "hidden assets."

Laird said the money was discovered by Aaron Robertson, who replaced Lopez as deputy director of administrative services. Robertson found the money, Laird said, after Coleman directed him to look into the secret buyout program.

In an interview Friday, Coleman said she first learned about the surplus from Robertson last week. Its large size did not become clear until recent days, she said.

"I have to take responsibility for it even though I didn't know about it. I'm accepting that responsibility," said Coleman. "I just don't like all state parks staff being somehow painted with this. They are extraordinary people and they deserve respect."

Coleman blamed Lopez for not informing her about the surplus during his five years as a budget official, and then deputy director, at the parks department.

"Manuel should have elevated it. That was his responsibility," Coleman said. "He shouldn't have kept it hidden, that's all. He was making a judgment call that was not his to make."

Lopez did not respond to numerous phone messages left at his home last week and on Friday.

Former parks director 'dismayed'

The surplus has existed for 12 years, Laird said, which predates Coleman in her decade at the department's helm. The prior state parks director, Rusty Areias, now a political consultant, said in a statement he also did not know about the surplus.

"I was as surprised and dismayed as anyone to hear that parks department staff might have been underreporting state funds," he said.

The Department of Finance relies on state departments to self-report funds each year as a basis for building the governor's January budget. Those figures are the foundation of the budget act that lawmakers and the governor ultimately pass months later.

The Controller's Office pays state bills, but does not have a direct role in the budget process. Still, it produces its own year-end cash reports, which repeatedly showed that the parks department had tens of millions of dollars more than parks officials were reporting to the Department of Finance.

In most cases, the controller's numbers differ from the Finance Department's for legitimate reasons, said Finance Chief Deputy Director Michael Cohen.

The controller's report "is really a history document of what's been spent and how it's been spent," Cohen said. "A budget is a planning document about how dollars will be spent and in what way. So we have different rules governing the way things are reflected, how dollars are treated and which fiscal year shows dollars being spent and received."

Cohen said Finance Department officials routinely compare data from departments against controller figures when it comes to the state general fund. In those cases, Cohen said his department must explain why differences exist, and usually attribute it to accounting techniques.

But when it came to the 560 special funds that generate revenues from dedicated sources, including the parks funds backed by visitor fees and off-highway vehicle enthusiasts, Cohen said the Finance Department did not compare its data against the controller's numbers. He did not know why that was the case.

"Finance should be using our numbers to craft their budgets but apparently they haven't done that," said Hallye Jordan, spokeswoman for state Controller John Chiang. "The numbers in our report are actual. If Finance did not look at the actual numbers and relied on other numbers in building their budgets, the question should be asked of Finance. We don't help Finance build budgets."

In the wake of Friday's revelation, Cohen said his department has launched a study of all special funds to see where the Finance Department's reports differ from the controller's – and determine why.

State lawmakers from both parties questioned Friday whether the same multimillion-dollar discrepancies exist in other state departments and wondered if the data upon which the state budget rests are flawed.

"We've clearly got to figure out what happened, why, how this is possible," said Sen. Joe Simitian, D-Palo Alto. "An obvious question is, how can we be sure the problem doesn't exist elsewhere in the same (parks) organization or in other state organizations?"

Simitian worried the incident could further erode public trust in state government.

"On a larger level, this is unfortunately one more thing that will lead too many folks to say they just don't have any trust or confidence in public institutions," he said.

Laird said the Legislature eventually must decide how to spend the hidden money. He as well as Coleman and Hart said they hope it can be used to restore services at the state parks targeted for closure and other cutbacks.

"This is the worst violation of the public trust that one could imagine." TED JACKSON, former deputy director of operations at the parks department